20VC: Ramp's Eric Glyman on Why You Should Never Take The Highest Price, Working With Venture Funds vs Crossover Funds and How To Determine What To Buy vs Build as a Founder Today?

Eric Glyman is the Founder and CEO @ Ramp, the only corporate card and spend management platform designed to help you spend less. To date, Eric has raised over $390M for the company from some of the best including Thrive, Stripe, Founders Fund, Coatue and Box Group to name a few. Prior to changing the game of spend management, Eric founded Paribus, the price-tracking app that raised seed funding from General Catalyst and Greylock, which was acquired by Capital One in 2016. In Today’s Episode with Eric Glyman You Will Learn: 1.) Entry to Startups: How Eric made his way into the world of startups with Paribus and how that journey and exit led to his founding the recently minted unicorn, Ramp? 2.) Decision-Making: How does Eric deal with moments of intense pressure as a leader? How does pressure impact Eric's decision-making quality? Through what framework does Eric evaluate his decision-making process today? Why does Eric believe operational velocity is so key to company success? How does Eric determine between being fast vs spending real time on something? 3.) Funding Rounds: Why does Eric believe that "funding rounds are science experiments"? What should founders look to prove or disprove with each round? Why does Eric believe "you should never take the highest price"? What are the downsides? How does it impact employee stock options? Does it change investor sentiment? How does it change customer acquisition through referrals? 4.) The Rise of Crossover Funds: What does Eric make of the rise of crossover funds? In what way does their value differ to the value provided by traditional VCs? How does their communication style differ compared to traditional VCs? Does Eric worry about the signalling risk of having crossover funds invested early? Does Eric believe they will change the landscape of venture? 5.) Board Management: How does Eric analyse his style of board management today? How has it changed over time? Where does Eric believe many founders go wrong when it comes to board management? How can boards be used to bring together the wider team and company? What documents does Eric always prepare for the board? Item’s Mentioned In Today’s Episode with Eric Glyman Eric’s Favourite Book: John Wooden: The Legendary UCLA Coach's Top 20 Quotes As always you can follow Harry and The Twenty Minute VC on Twitter here!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back to 20 VC with me, Harry Stebbings. Now, the guests on the show today and their company made headlines recently when in very quick succession, they announced not one but two very large funding rounds, giving them a unicorn valuation. Now, if that doesn't give it away, I don't know what will, but I'm thrilled to welcome Eric Glyman, founder and CEO at Ramp, the only corporate card and spend management platform designed to help you spend less. To date, Eric has raised over $390 million for the company from some of the best, including Thrive, Stripe, Founder's Fund, Co2 and Box Group, to name a few. Prior to changing the game of spend management, Eric founded Parabuzz, the price tracking app that raised seed funding from General Catalyst and Greylock, and was ultimately acquired by Capital One in 2016. I'd also want to say a huge thank you. This schedule was such a team effort.

• 0:45Harry Stebbings?

  Kareem at Ramp, Kareem at Thrive, Kareem at Stripe, Zee at Row, Dave Tish at Box Group and Matthew at Eight Sleep. Amazing question suggestions and I so appreciate that. But before we dive into the show today, did you know that more than 80% of US public stock is owned by just 10% of Americans? This divide is even greater in the private markets. Carter makes it as easy to issue equity to your employees as it is to issue payroll and for employees as easy to accept it too. More than 16,000 companies issue equity to their employees through Carter. Whether you're just getting started or getting ready to go public, the team at Carter can help. Check them out at Carter.com. And then another incredible product you have to introduce is SecureFrame.

• 1:25Harry Stebbings?

  SecureFrame helps companies get enterprise ready by streamlining SOC 2 and ISO 27001 compliance. SecureFrame allows companies to get compliant within weeks rather than the painful months that is today. Join companies like Stream, Hasura, Benapass and unlock more sales with SecureFrame. And 20 VC listeners get 10% off at SecureFrame.com/20VC. And finally, I've always been a big history fan and so I want to talk about Cooley, the global law firm built around startups and venture capital. Since forming the very first venture fund in Silicon Valley, Cooley's formed more venture capital funds than any other law firm in the world with 50-plus years working with VCs. They help VCs form and manage funds, make investments and handle the myriad of issues that arise throughout a fund's lifetime.

• 2:09Harry Stebbings?

  So to learn more about the number one most active law firm representing VC-backed companies going public, head over to Cooley.com and also check out CooleyGo.com. But enough of me and so now I'm thrilled to hand over to Eric Glymon, founder and CEO at Ramp.

• 2:29Speaker 01

  You have now arrived at your destination.

• 2:32Harry Stebbings?

  Eric, holy shit, my friend. It has been many years since we were sitting in a bar in New York together. I do miss those times, but I cannot wait for this. So thank you so much for joining me once again today.

• 2:42Speaker 02

  Thanks, Harry. It's great to be here again.

• 2:44Harry Stebbings?

  Well, that is very kind of you, but I do want to start with some context. I love a bit of background. So how did you make your way into the world of startups? And how did you come to found the unicorn that is Ramp?

• 2:53Speaker 02

  I got into this in a very funny way. My first job was actually in restructuring and bankruptcy. And so it's seeing companies at the end of their life, which is a bit atypical, but the skill set there was, one, could you first just have a healthy respect for what has to be true for businesses to like stay in business? And next, a lot of the skill set was, is there value to other people have missed and are totally overlooked? And that skill set really translated well into what became my last startup. It was a company called Paribus. We figured out that consumers were leaving billions of dollars on the table, literally. Whenever prices would drop, like a day, two days, a week after they bought items online. And so we built an email app that automatically got customers' money back. We launched that in May of 2015. You covered us, actually. It was one of the first shows you did.

• 3:34Speaker 02

  I think it was probably five months later. And within a year, we had almost a million customers that were using that. And yeah, it just kind of went from there. We got bought by a bank in the US, saw a lot of new things, you know, change of views and just kept going at it. And I love it. I found it addictive. And it's interesting just to be able to go pull people together and try to build towards something.

• 3:52Harry Stebbings?

  I totally agree with you in terms of that addictiveness. I think you sold way too soon, by the way, but we'll move swiftly on from that. I do have to also, because you know, I constantly think about the value of like serial entrepreneurship, whether it is valuable, it isn't valuable. Question for you is like, what was the single biggest takeaway from the experience with Paribus? And how do you think it impacted how you think about building Ramp today?

• 4:12Speaker 02

  So I think the biggest single takeaway for me is having first like a very clear strategy or narrative. And I think it's this view of like, where is it that you want to go and what is your company really about? Because it drives constraints. And so to put it simply, with Paribus, we benefited a lot was it was this app that saved you money. All you need to do is sign up and it would work in the background and that was it. And with that fixed, we could go into great, this app does something. Maybe how do we make the app better? How do we grow this app? Whatever it was, but it was centered around this mission and narrative around it. And you weren't trying to solve too many issues at once. And I think that with Ramp, as a company, it's day 788. We're just a little bit over two years old.

• 4:53Speaker 02

  And I think that what's helped us start to build this impression and just awareness in the market is, you know, we say we are the first corporate card that helps companies spend less. And with that fix at this notion of sure, this is a card. This is spend management software. We're getting into a lot more, but this notion of we really are aligned with companies. It simplifies our brand positioning. It makes clear even for we're about 100 people now. What are we trying to work on? What are we about? And the effort day to day of growth, of marketing, of risk, all this assessment is really centered on, how do we move that forward? And so by fixing early in the life of a company, really what's the bigger story? What are you about? It allows you to move much faster on the other question.

• 5:35Speaker 02

  So we can get into that, but I think actually fixing the core of the company early is really key.

• 5:40Harry Stebbings?

  I totally agree with you, especially with that kind of single core message. I invested in Superhuman and theirs is obviously like simply the fastest email experience known to man. And so I totally agree with you in terms of that core strategic mission and being very clear about it. I do want to start with you though, because you know, I spoke to so many of our mutual friends, your investors before the show, and they said that there were many incredible traits about you, but one in particular, they said you're amazing at dealing with intense pressure. What do you think makes you so good at dealing with these highly pressurized situations? And how do you deal with shit hit the fan moments, Eric?

• 6:13Speaker 02

  About a lot of those. I guess part of it is you go through it and you get a bit numb to it. But I think some of it, it came from a couple of experiences. One, so I grew up in Las Vegas, but I actually lived in China for almost two years. And it's a really strange experience going to a new place, being like a full grown dude and basically being helpless. Like you can't really have a normal conversation with people. You rely a lot on others and you really feel quite viscerally. Like you could get upset, you can be really happy. It doesn't matter. Your emotions have a certain impact on the output, but not so much. You had to sort of develop. Some real skills is work through things if you wanted to make some change and get to be a lot closer in that world.

• 6:52Speaker 02

  And I think actually, I think a lot of people aren't used to having experience where totally everything you've worked on for 18 years just doesn't work in some place. And so I think that moment put a lot of things into perspective. And in later, when I found myself, whether it was with Paribus, we had a lot of stress. Like there was one month when 80% of our revenue disappeared, basically overnight. We got cease and desist from some of the largest companies in the world, like real moments of stress. And I'll put it this way, whenever we really were truly stressed, that was when a lot of the worst decisions were made. And I think a little bit of what I try to do now in moments when I find myself like really getting out of whack or quite stressed is almost asking like, all right, you're really stressed, does that help you? And I think by just having a little bit of that calmer inner monologue to say like, no, maybe it's not. Okay, what will?

• 7:37Speaker 02

  And trying to work through piece by piece and taking a couple of moments to slow down helps actually figure out, it's like, all right, we're here. What are we going to do to get out of this situation? What are we going to do to move things forward and be a little bit more, I guess, stoic about the whole thing? So that's the highest level. I obviously can go a bit deeper from there.

• 7:53Harry Stebbings?

  Yeah, I mean, it's interesting you said there about kind of the quality of decision making and how the emotional elements impacted that. I do want to touch on decision making because it was another point that people brought up. And it's like, when you think about decision making today, how do you analyze your own decision making process? And has it changed?

• 8:08Speaker 02

  It's super interesting. So I think I've benefited a lot from, one of my co-founders, Kareem Ittia. And we're very, very different people. You know him a little bit, you know me a bit. And like, I think in some ways we couldn't be more different. He grew up in Beirut, Lebanon. It's kind of a stressful place. There's always a little bit of kind of on edge and sort of thinking about like, what are we doing like lately to move this forward? Whereas for me, like you kind of call that out, it can be a little bit more relaxed. How do we go and move to the bigger picture? But I think the first part of great decision making is trying to agree on like, what are we optimizing towards? Like, what do we agree that we are trying to do? And for us, it could be for ramp, it's to build an incredible business that helps our customers actually save money. It could be about growing revenue by a certain amount, but we really try to agree, what is that? Separate ourselves out from the problem and say like, forget my stuff, forget yours.

• 8:53Speaker 02

  We're trying to do this. Let's talk about how we get there. And so trying to remove yourself. From it. Next, I actually think a lot of it comes down to like a question I ask a lot is like, all right, in my decisions, there's a lot of people who depend on it. Either one, I could be holding up someone else from doing their job. A decision that either I actively make or don't will affect a service that a customer does or doesn't get, will affect results that I will or will not see next month. And there's kind of this question of like, am I actually living up to others? And if there's others that are being held up, if I think like, actually, this is going to hold up core progress that needs to get done on this agreed thing that isn't just my own, that needs to move me towards action. So I think a lot of it at the core is like, can I actually live up to other people that are putting their trust in me that have invested their time?

• 9:37Speaker 02

  Maybe they've given up other great jobs to be working with us. And so at least for me, if it's only up to me, like I can put things off and be lazy about stuff. But if it's other people, I'm like, oh shit, I don't want to disappoint this person. How do we go and make a faster decision or a higher quality decision?

• 9:50Harry Stebbings?

  I am totally with you in terms of kind of that responsibility to others, be it customers, be it employees. And it's interesting because it goes to the element of velocity, really the velocity with which you make decisions, execute, and you know, on your board decks, you have like the day old nature of the company. I mean, I had, I love that. I've never heard of that before. But everyone was like, man, these guys just move so fast. When you think about velocity, like, how do you think about doing it fast versus doing it right? And how do you determine between what to take very slowly and deliberately versus just go, go, go?

• 10:22Speaker 02

  So one, I think earlier we talked about this notion of like, what can you fix in the business? And one of the things that ramp, the notion that we're trying to live up to is how can we build software and financial services that are so efficient that they will literally help our customers have a dollar count for a dollar five. What used to take an hour could take five minutes. And we know that those are the kind of things at the highest level, we want to save money, we want to save time. But we need to build all these systems to get there and there are certain building blocks along the way. And so there's parts of what we build, which, for example, we didn't ship anything to customers, I think in the first 120 days in the life of the company. And we were building the core ledger and we were building the core financial infrastructure and a lot of the core accounting integrations, all that. And those things need to be extremely right and correct.

• 11:04Speaker 02

  And so there's some things of core foundational building blocks, like get that right. However, there's other things of like, great, like, can you grow 10% this week? I think is a lot of the question that they'll ask it. Why Combinator made famous? Or can you go intestinatory fast? Where like, being right actually isn't important. Actually, most people will never know what you try unless it works, in which case it worked. And so you need to iterate very, very quickly. And so I think that at the heart of it, I do very deeply believe that that speed is everything. Like, what is the shape of slope in terms of what you're doing always is like how you should judge teams in their output. But it's not to say like, hey, on everything, we apply it. So there's some split approach. And then I think next with regard to your question of days, like, it's true. Like, at every company all hands, we do two weeks. There is the count of what day is it in the company?

• 11:48Speaker 02

  At every board meeting, it's there and we can look and we can say, great. Like, we can look back at early documents and see, all right, within a 66 day period, what was accomplished? It might be at this level of the company, we grew 150% in terms of revenue. We shipped X, Y, Z features, all that. And I think that when you do that and you think in more narrow terms, there's a couple of big key impacts. First, it forces you to think about, one, how much can we put out like now? What's kind of the shape of things? And you can even compare, are we getting better with the same set of periods, shipping more stuff? And then two, even evaluate like with the resources that we had, were we still able to make that incremental effect? And look, we've never been about going, I don't think that we've ever grown or tried to say, let's go 10x.

• 12:32Speaker 02

  We've only said, let's try to grow 20%, 30%, 40% in a single month. And if you can do that, you really access and you have the core foundations are staying true. But you're getting this incremental in this compounding growth. And I think like, that's really what you're trying to optimize for is how do you build things through like 10%, 10%, 10% kind of compounding that will lift you and force kind of this high momentum growth?

• 12:54Harry Stebbings?

  I love the way you said there in the beginning about, we didn't ship anything for 120 days. Like, that was some terrible thing. And then you kind of explained why. And it's like the infrastructure build out is kind of quite intense. I guess my question to you on that one was like, how did you determine between what to build versus what to borrow? I mean, especially in the space that you're in with a lot of the providers. Some of it is off the shelf, but you decided to build your own. I guess what was that decision-making process between build versus?

• 13:18Speaker 02

  We do this all the time. And actually, I think in terms of a team, I think this is one of the greatest times ever to be building on top of and with the expertise of others. Probably five, six years ago, there was this early talk of this API revolution. You could tap into different APIs and build in services. And it was talked about a lot then. I don't think it was really true, but now it is. You know, one of our first partners was a company called Marketo. They allowed us within, you know, effectively through the expertise they had with banks, with the credit card networks, with approaches, they gave kind of the rubric. If you want to ship, here's what you need to get done. Within 45 days, we were able to be live with our partner bank. Within 55 with Visa, within 65 internally, we're able to go and start doing internal transactions. And that would never have been possible if we said, let's go build integration with Visa.

• 14:01Speaker 02

  Let's go build integration with our bank. Let's go do all this stuff. But that's an API that really benefits. And all the way through, there's lots of things like that. There's APIs that we'll access in order to connect two different accounting services to go and ingest, let's say, parts of receipts. And I think that you can do this by one, at least getting a baseline of one. How do you get things up fast if you're optimizing towards momentum? How can you build things with incredible speed? But then two, you have a real benchmark of what is good. And if you really want to make the decision of what you're going to build yourself, you can actually do this analysis to figure out and say like, of the resources I would need to invest, could I do it faster? Could I do it more cheaply than actually going and investing? And I think that that actual hard evaluation of your decisions is really interesting. And by being able to integrate with so many services to build parts of your business,

• 14:46Speaker 02

  you can actually make a hard cost and time assessment of like, should I build this or should I integrate or should I buy and do that? And then I think it gets really interesting. So that's like on the core parts of the building. The next part is like, all right, are there certain things that we should definitely build? And I would say what we've definitely centered heavily on is a lot of the core infrastructure for, I think, a couple of things. One of customer models of, let's say, growth models. And then last, I think of data centric models around what things actually invoices, prices, what things cost. I think that a lot of really the north star of where we're headed as a business is, can you actually go understand what things cost and build, let's say, like a ways for all sorts of business expenses, a Shopify suite for the CFO? And so there's lots of elements that are proprietary about connecting the data

• 15:31Speaker 02

  that are very proprietary to ramp. But ultimately, the core parts of like, do we need to go build a credit card on our own? Like, no, like that's been built. That's been around for 40, 50 years. Do you need to figure out like an ACH? Probably not. But some of the things in between? Definitely.

• 15:45Harry Stebbings?

  It's so interesting hearing you talk that because it's like it's almost solving a lot of the pain points of Paribus in some ways in terms of cost effectiveness. But through the much smarter fence insertion point of the central banking insertion. Do you know what I mean?

• 15:59Speaker 02

  Oh, it's a real business model. I mean, Paribus was a lot of fun, but it was kind of crazy. It was like, let's go send like thirty thousand customer complaints per day. And then, you know, charge your customers some portion of this interchange is a great business. It's just a question of, I think the problem in the credit card industry is that the issuers are so misaligned. They're often trying to like outsmart their customers, tell them, we'll give you eight X points on this, five X points on this. Incentivize your customers to spend more and effectively do the opposite of what a lot of business owners want, which is to be more profitable. Our view is like, hey, like, how can we actually help people spend less? And if we can do that, maybe we'll earn the right to earn the interchange. And so I think we actually found more of the fit of where these ideas of real alignment. If you can do that and apply it to a real business model like credit cards, you can build a fun business. And I think that's really helped power a lot of Ramp's growth.

• 16:43Harry Stebbings?

  Is it not difficult though for you? Because like when you think about your own revenue optimization, it is in some ways in odds with the best and most effective use of capital for your customers. How do you think about that balance and tension and what you optimize for, be it transaction volumes, interchange volumes? How do you think about that balance?

• 17:00Speaker 02

  So first, there's this question of like, why isn't Amex doing this? Like, why isn't Amex going saying, let's go apply like a savings algorithm? And for them, it's a really, like, this is true, like Clay Christensen, innovator's dilemma. It's like, yes, you could go and help your customers spend less, but that is purely hurting you. And it's just really wonderful to say, a year ago, we had zero customers. And our strategy to acquire customers is to genuinely be helpful. And sure, maybe it's not a hundred percent of what they might otherwise spend, but having ninety seven percent versus zero percent sounds pretty good to me. And so I think that's powered a lot of like the early genuine, how do we build valuable software for users? But I think that now as we evolve, it's the question of how do we create the value? And some of this is by seeing lots of different workflows and seeing lots of patterns, you can see how really efficient businesses.

• 17:44Speaker 02

  Either one, where is there a lot of waste in time processes? And where can you start to automate and invest in software that will cascade? And let's say like reduce the amount of time for accounting integrations will go and speed up. Or processes, but then later, as you're starting to actually have more of the ecosystem on your rails, you can see price discrimination in action, you can benefit. And so in a lot of ways, there still is this element around great, like if we can really build great software, we probably can go and distribute some of these interesting insights back out, which will create this faster flywheel. And maybe we're not capturing everything. And I think if for as long as we're willing to give more of that value away to customers, I think it's okay. And I think you get alignment through the benefit of the crowd and the wisdom that goes back to each and every business.

• 18:26Harry Stebbings?

  I mean, speaking of alignment, there's no better alignment than the alignment of VC and founder, as we both know, because we're all around the friend who is VC is Eric. Just remember that. On the fundraising side, I do want to touch on it because it's been such an incredible journey with Rams fundraising, to say the least. So tell me, you've before said that funding rounds can be thought of as a science experiment. What did you mean by this? And how does that shape how you think about fundraising?

• 18:49Speaker 02

  Yeah, I actually think it was someone at Slow Ventures who I think had this notion that I lifted this from. So I'll give them the credit, but it's this really interesting and daunting thing, right? You're starting a company and you're like, we want to build Ford Motors or like Tesla or Google, and we're going to raise $2 million and go do that. And like, it's both crazy to kind of start a company and think you're going to take on the world, but yet only have a small amount of dollars. And I think that this notion of a science experiment is this really interesting thing. And often in experiments, you're running, let's say like five, six different ways to go and approach a question and figure out, could you actually prove something to be true? And I think often early in the life of a business, it's kind of like that. You're trying to answer the question of like, do customers want this? Can I build a team effectively that can ship software?

• 19:33Speaker 02

  Do I have an efficient way to maybe I have a good product, I have a good team, but I can't figure out how to get customers? And I think that you're trying to answer a series of questions. And so when our first round at Ramp was an unusual one, we raised an $8 million seed round in parts to fund the company, in parts to fund the credit card purchases that our customers will be making. But what we said is like, all right, we want to prove out, call it five out of eight core things. And if we can at least prove a core set of these five, we will know we have a business and we have the right momentum and are probably a good investment for a later round. Maybe where we raise twenty million dollars or fifty or all that. And we said, okay, with our first eight million dollar science experiment, could we prove that we could actually create a credit card that people will use?

• 20:15Speaker 02

  Could we have this credit card add value above just giving customers cash back? That would be different and prove part of this core thesis. Could we effectively acquire customers? How would we do that? And there were some nice to haves too. And if we could do that, at the end of the experiment, we might be able to say, look, we have a business that works. It makes revenue. Customers are using it. We're not losing too much money. We're able to acquire more. And we've now proven enough things out that with this next, call it twenty million dollar trunch, we're going to take on these harder and bigger and different experiments. And I think in thinking in that way, it again comes back to this notion of constraints. With this limited amount of money, you can only do a limited number of things. Not all of them will work, but if you get a couple of them right, which ones need to be? Go do that.

• 20:56Harry Stebbings?

  So I love that in terms of the science experiment. And I agree with you in terms of that stage thinking. The challenge that I have for you now, and this is a little bit harsh of me to just throw on you. Constraints enforce creativity. They're brilliant. You've just raised quite a lot of money. The constraints are a little bit lifted on you now, my friend. How do you think about moving from a world of constraints? And we're proving this, this, and this to there's quite a lot of cash.

• 21:19Speaker 02

  Yeah, it's pretty interesting. I mean, I'll put it this way. So right now our burn rate is not far from what it was like even like a year ago. And so there's an element of we now just have a lot more time before the expiration, call it like a decade, you know, versus like we can run out of stuff in two years. And I still think it's possible, even with a lot on the balance sheet, to take that rigor operationally that you've established and put in the heart of the DNA, not just among the founders, but really deeply throughout the organization that will cascade and compound. And so some of it is just training the system. I think early on isn't important. But to this next question of like, all right, we now have a lot of cash on the balance sheet. How do we not go and get crazy wasteful about it? I think it's really a test of, did you do it right? Did you build an organization that says we're going to value shipping stuff over it?

• 22:02Speaker 02

  I think that way that internally we perform and look at our decision makings is, is it going to go and cost efficiently? So we have certain bands that we're trying to achieve, like move things forward from a growth perspective, from a shipping perspective, all that goes. But I guess I

• 22:15Speaker 02

  I would say though with all the cash on the balance sheet now and why like why was it that suddenly we went from like not raising very much to you know we just closed a hundred and fifty million dollar equity round is a hundred fifty million dollar debt round what's that about I think some of this is really just about really amping up the pace of hiring great people and then two we've grown very quietly in the past I think we spent like fifty thousand dollars on marketing last month but are doing like a billion dollars of transactions a year so it's like it's this very interesting disconnect and I think now with this very highly rated product this system that people really like we do think now this is the time to start to go more aggressively and other things like marketing and like you know potentially acquisitions too so more to come on that one but I think that we've earned it.

• 22:58Harry Stebbings?

  You totally have but you mentioned kind of how much you raised there with the last hundred and fifty million price round on the price itself it was a high price and so I'm interested to hear your thoughts because when we spoke before you said about never taking the highest price can you talk to me about how you think about as a founder how you think about price when selecting your financing partner?

• 23:16Speaker 02

  Totally so I think there's a few variables one first like of course it's like you're trying to finance the company but I think a lot of people get into this very zero sum view of it and I think being a multi time founder like you kind of experience is like you sold the company maybe it was a small sale but you're like whoa I have chips to the next game and you start to think about really what is the optimization it's not on the single round price it's on total enterprise value and so the question that I think you should be trying to answer is like in the long long term of this business what can I do now that's going to maximize the chance of success and I think that very quickly if you go into that one of the I think insights that comes out is like it's not just about maximizing the amount of money for the company to go use it if anything we just established like we've got money that we may not use for years that's sitting on the balance sheet a lot of really the optimization is like not just how does the company grow but also like investors can add a lot of value and I think one of the worst things that can happen when someone raises that price that's very very high is people are like yeah I got in the deal but I don't feel like so great I think the next round maybe it'll return twenty percent over the course of two years this risk reward and you don't see people saying like I love this company ramp it's just amazing right when you've got to

• 24:25Speaker 02

  Great deal on anything you buy, you talk about it with your friends. So it creates this aura that can be really important in B2B. Next is if you leave value on the table, you start to have really happy investors who go to bat, tell their people about this. They tell other companies about it because they're excited and feel like it can go up even more from there. For employees, you can go and tell them with a straight face. So one, there's notion of 49As and common stock purchases. That is based on a percentage typically of the price that you raised at. By raising at a lower price, you actually make your stock more affordable for your employees and they can enjoy more upside. And you can tell people that and actually a lot of the best employees don't just want the highest cash offer. They want the highest enterprise value package over time and being able to afford the stock

• 25:07Speaker 02

  and being able to get instead of a 20X, but maybe a 40X multiple means you start to get these compounding advantages, not just at the company level, but at the investor level who are going and want to believe and support the company. At the employee level, people who want to come and do more there. And then actually, over time, you build this reputation of like, wow, everyone who's ever invested in Ramp has always made money and it's always a great deal. And I think that when you do that, fundraising becomes much less of a fight, but actually, how can we bring together incredible people around building this company into life? And so I think by never taking the highest price, you actually can sort of start to get into like, how do we just build a great company, pull together the great people and tap into that? So that's the thinking.

• 25:47Harry Stebbings?

  You mentioned investor value add there. Now crossover funds have played a big and a prominent role in fundraising over the last couple of months. There's been a lot of writing about kind of better, faster, cheaper with regards to certain funds. How do you analyze and think about the rise of crossover funds? Especially given you have some of the most prominent and best in D1 and Co2.

• 26:06Speaker 02

  So I think you had two points in there and I'll try to go a little bit into some of the first. This question is like, all right, do investors do fuck all? Like are investors actually able to add value and be helpful? And in some categories, I would say absolutely not. I think that in B2B, I really think that they can. And as a question of like, what skill sets do you think an investor has? Whether their networks and can they actually help? For us, the number of customers are, call it in the four figures with Ramp. And one of the most valuable currencies for going and getting a B2B customer can be like, who is the Introduction from is it from somebody that I trust and if you've got great people around the table actually and you structure it well, you can actually build part of your book of business through your cap table strategy. You can build great skill sets. You can talk to some of the best minds in capital markets, the best minds in design,

• 26:50Speaker 02

  the best minds in marketing and actually say, here's what we're trying to do. And whether it's you or your members of your team, there's great advisors actually built into it. So you can actually start to think a little bit about diversifying and having different skill sets on your team through the investment process itself. Crossover funds, I think are really interesting for a couple of different reasons. One, I think one of the biggest things that when we heard when we were starting Ramp is like, great, you want to start a credit card business. This is so capital intensive. You're going against hundred billion dollar plus companies. They're spending billions of dollars a year just on ads. You need a giant balance sheet. How do you do that? And in a strange way, crossover funds were this really interesting, compelling answer that didn't quite exist years ago. You know, first, are they interested in one, they've seen and they know these public companies and how inefficient they are

• 27:34Speaker 02

  because they've been investing in them in a public side. But actually, if things are working, they want to invest not just in your A or your B, but in your series C, your series D, your E, whatever you name it. And I think that doing that suddenly means that so long as you can deliver the performance and really the value, you can know or at least be more confident that some capital is actually there. And so for a capital intensive business like us, it was the perfect fit. And they're pretty smart, too. I think sometimes it's defensiveness where people say like, I don't know, they're coming invading. And like their returns are pretty wild and they've been some of the most helpful investors we've had, truly.

• 28:06Harry Stebbings?

  My question to you is, and it doesn't need to be like the value of their help, but does their interaction style differ compared to traditional venture?

• 28:14Speaker 02

  They think about different things. That's for sure. And I'll give you two contrasts, right? So on one side of it, let's say like Keith Raboy and the team at Founder's Fund, amazing seed investors, right? A lot of for them is like, you're going to build this thing that compounds. How do you build great organizations? How do you think about a product that really will be great? And like, that's really what the obsession is about. I think about Co Two and D One. Co Two, I think famously became this behemoth by betting on Apple and these great huge marketing stories. And it's like, how do you go and do it big and think? About it are constant questions that they're really asking and thinking access. This is like a core question, I think, that coach you ask often in these investments. I think with D1, a lot of this is like, how do you build a great business? So forget a great product and a great team.

• 28:57Speaker 02

  But flash forward a few years, how do you think about the financial inards? That will actually make the unit economics, the performance great. And I actually think that each of them have very different, but important questions that you can actually bounce off these core questions on your business with each and push it forward. And so it's all to say, I think that by seeing some of that public market perspective, you think about this business that is logical conclusion. Where does it go? And how do you plan for that years early when you can still affect the outcome? It's not fully baked and it's been really useful.

• 29:24Harry Stebbings?

  Can I ask, do you worry about signaling? Signaling is like often thrown around with multi-stage funds investing at seed. When you think about it, just potentially being applied later in the stack here with like crossover funds. And as you said, they can do your C, D, E publics. I mean, they can do fucking everything. So like, do you worry that having them in at the B and the C could signal negatively? If they don't do the D and the E?

• 29:44Speaker 02

  I don't very heavily. I mean, I think the biggest thing is, you know, one, if you've got great performance and things are working, no one can really hurt you. And I think that if things are really not working, no one can really truly help you all that much. And so at some level, it's kind of, it's up to you and the team at the end of the day. And you gotta keep it moving. I guess what I would say about the signaling parts of it, I think one of the under talked about attributes of crossover funds in particular is they don't have these, they're like throw out ownership targets. That's not nearly as important as call it valley venture funds make them out to be. And they could be perfectly fine actually saying, we're going to buy 3%, 5%, 8%, 2% at a round. Often in these growth rounds, that is the norm. They're going and saying, we're going to go and buy just a very small element of the cap table.

• 30:28Speaker 02

  And so one, you don't see this very dominant equity positions in the same way you might see for an early value VC that before has like a quarter of your company. And they're like, I don't want to invest any more in it. And like, that's really scary. But for someone who has a piece of it, not totally dominant, actually has a lot less signaling in and of itself. I think that the other great benefit of that is you actually have a lot of people who, if things are really working, all would like to own more. They're not at this very heavy ownership target. And so in a strange way, it actually can be an accelerant. Even later to excitement around the company, momentum around a deal and all that. And so in a strange way, because people are not buying such large and dominant shares in a company, it actually can help make sure later rounds, if the performance are there, are really healthy and competitive rounds.

• 31:10Harry Stebbings?

  Listen, I totally see the difference in management masses being like ownership centric to like the crossover, which is more like, you know, foie gras, how much can I stuff in and how much more can I stuff in? Which, no disrespect, I totally make sense in many, many respects. I do want to touch on one final element though, before we do the quick fire. And so many people commented on bluntly, your style of board management. And it's a weird thing to gain a skill in bluntly, there's no school for board management. So how do you think about and analyze your style of board management today?

• 31:40Speaker 02

  I think it's a couple of things. One is a question of first, like, what is this board meeting for? What is the purpose of this? I think a lot of founders look at a board meeting, it's like, oh, I have this work to do. It's a dog and pony show and I need to put something together. Or this is a report card kind of a thing and a progress report. And often I think it's approached with a lot of like pain or we're going to go and look at things, just report and then move on. Or maybe I've got some strategy ask and I want to go ask different perspectives, which I'd argue is not really a great use of it. I think the use really of a great board meeting is one, it's a chance, call it every two to three months, to really think deeply and evaluate how is the performance of your business been? To lay out what was achieved, to lay out like, what is the hypothesis of a business going forward?

• 32:23Speaker 02

  And to lay out not just some clear ask, but even the strategy. And the use of it is not just for the meeting, the meeting itself really is maybe a 90 minutes, two hour kind of thing where you get together, you talk about some issues and you move on. But actually, it's what you do the following week. We actually go back to the company, all 100 people at Ramp can see what was in the board meeting. And it's a chance to actually distill down the strategy itself. So in a weird way, the board meeting is a device and a forcing function to come back to the company and say, here's what we've really done, here's our strategy going forward and actually serve as a living, breathing document. Over time, that you can evaluate the evolution of a company's strategy, but even understand, here's what we're building over the next two to three months. How do we go together to that? And I think if you think about it in this way.

• 33:05Speaker 02

  You start thinking about it's like, whoa, okay, like I've got all these people who invested, were spending time building this company. How can I speak very clearly and articulate what the company is trying to do? So that it's clear and it's intelligible. And I think the flip way of thinking about it is like, at one point, I was 50% of the headcount of the company when there were 33% when there was three of us. Today, I am 1% of the company and I don't have a lot of time and it's very rare to have shared constantly be able to go and talk to everyone throughout the company. But actually taking the time to do like a 50, 100 page deck, really lay this out clearly means it's almost like I can go one by one and spend some time through this company and really scale clarity and communication. And I think it's very helpful. You can look back years over time. It gives people kind of the sense and permission.

• 33:49Speaker 02

  I can write the history of this company too. I can see the good and dumb decisions this company made before, and I think it's a really useful document.

• 33:56Harry Stebbings?

  Can I ask you a bit of a weird one for the quick final? I do just have to ask it, which is like, when I listen to you, everything is just very kind of logical and calm and clear. And life's never like that, as we both know. What is really fricking hard right now, Eric?

• 34:08Speaker 02

  What's really hard is like, the job is schizophrenic and that what made you good two months ago probably would be holding you back. And if you really are growing at a compounding rate and suddenly three months later, your company is twice the size and three months after that, you're 4X the size and then 8X and then before you know it. Like what made you an effective leader like three months ago, it probably will screw you up if you're doing that right now. And so I think that what always kind of keeps me up is like, all right, I cannot actually just do the same thing every day. My schedule is a super mess. My inbox is a disaster. And if I just am trying to go and get into repeat patterns, that probably will throw off the company. And so I think that's a deeply weird thing and job and I don't love that, but it's interesting. It's sort of like every day you get to start fresh.

• 34:52Harry Stebbings?

  Who's your operator mentor? It could be a founder, it could be an operator that you're like super close to and look to learn from in terms of your personal scaling. Who's that mentor for you?

• 35:01Speaker 02

  I think one of my favorite books, and I think some of that I find I go back to when I'm very deeply stressed about stuff would be like John Wooden. He was a basketball coach of UCLA. They had the most dominant record in the NCAA. And he just was this like deeply calm, nice dude and he was a coach, right? The job was like not just like, how do you go and have amazing strategy? It's like, how do you do your best? How do you try? How do you pull the best out of other people? And like, I think a lot of that approach of it's like, all right, forget the like different hacks and tips and tricks on like different skillsets. I think that that kind of thinking on like, how do you just have like clear calm thinking? And get good performance out of people, I think has been very helpful in general. I think there's other great people who've been helpful along the way. Like I look up a lot to Z at Row. I think he's an incredible pace, all this energy.

• 35:45Speaker 02

  Kareem, my co-founder, I think that he just keeps things moving at this very rapid pace. And there's some great strategy minds too that I'll talk to. But I think that in terms of thinking and as a person like John Wooden, I he passed away a while ago, I'd never met him, but like, he's amazing.

• 35:57Harry Stebbings?

  Do you want to hear the funny thing with me and Z? We've never spoken before, but I would say we're pretty good friends and we're like pen pals of old. It's super weird. I've never had it with anyone before. It's very funny and weird, but listen, I want to dive into a quick fire round. So I say a short statement, you give me your immediate thoughts. Does that sound okay?

• 36:15Speaker 02

  Sounds great.

• 36:15Harry Stebbings?

  Okay, so what would you like to change about venture today?

• 36:18Speaker 02

  It's so gossipy. For all this talk about being focused on the future, I feel like half the industry is wondering what are the other people working on or thinking about at this very moment?

• 36:27Harry Stebbings?

  This is going to be a political one. Who's the best board member that you've had on your board or sat on a board with and why?

• 36:33Speaker 02

  I'll give a shot at someone who I think is not as recognized. I'll go with Zach Frankel. Zach is someone incredible. He was involved with Parabas, he was involved with Ramp, Better.com, a number of other great companies. He's this really interesting mix of investor mindset, trusted in those circles, thinks about how to build great business, deeply smart. He was the top of his class at Harvard, Rhodes Scholar in machine learning. Like he's just smarter than I am, that's for sure. But has been in operational situations too and is in it.

• 36:59Harry Stebbings?

  Love that. And most people shy away and say, I can't choose my favorite child. Tell me, what do you believe that most around you disbelieve?

• 37:05Speaker 02

  That New York has still got it. Like the entire founder's fund and like, all these people are talking about Miami. I love Miami, but I think New York's great.

• 37:13Harry Stebbings?

  I'm totally with you. If you were a cocktail, what cocktail would you be and why?

• 37:17Speaker 02

  Old fashioned, simple, great drink, consistent, you're going to love it.

• 37:21Harry Stebbings?

  Tell me, what's the right way to think about competition? Yours is a competitive. What's the right way to think about it?

• 37:27Speaker 02

  I think internally, you have to think about them and view them at their best. Arrogance is super contagious. You know, if people see like the founders or other people at the team are like, oh, the competition is fine, or they don't understand this or that, it can really set in and become culturally okay. The reality is there's very smart people at other companies. Whether they execute and live up to that is totally up to them. But I think you need to worry about what could be the smartest decisions that they make and how do they execute at that level and be ready for it.

• 37:54Harry Stebbings?

  And then the final one, Eric, what are the next five years hold for you and for Ramp? And like, just how big could this be?

• 37:59Speaker 02

  I mean, very biased person, but I think this could be just truly enormous and generational impact. I think it's deeply weird that the status quo in the industry is a little schemey, that people are trying to figure out to get companies to spend more, but get them to be a little bit more wasteful and against what companies are optimizing for. A lot of our goal is just like Shopify has built software that is so useful to ecommerce sellers that it literally makes businesses better by being on Shopify. Could we build something similar for the CFO suite? And look, I think that there are many hundred billion dollar plus companies in this space. I know Amex has had since 1850 to work on it and there are a number of others. But I think that if you can truly do that and if you can create differentiated value in this very sleepy space, we think we can build something incredible.

• 38:39Harry Stebbings?

  Eric, I hope we don't have to wait another four years till we do our third show, but this has been so much fun and thank you so much for putting up with my way with questions.

• 38:46Speaker 02

  This was fantastic. Thanks so much for having me.

• 38:51Harry Stebbings?

  My word, I so enjoyed that one. I can't believe it was four years ago that we did our last episode. Such an incredible journey since. If you'd like to see more from us behind the scenes, of course you can on the 20minvc.com. But before we leave you today, did you know that more than 80% of US public stock is owned by just 10% of Americans? This divide is even greater in the private markets. Carter makes it as easy to issue equity to your employees as it is to issue payroll and for employees as easy to accept it too. More than 16,000 companies issue equity to their employees through Carter. Whether you're just getting started or getting ready to go public, the team at Carter can help. Check them out at Carter.com. And then another incredible product you have to introduce is SecureFrame. SecureFrame helps companies get enterprise ready by streamlining SOC 2 and

• 39:35Harry Stebbings?

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• 40:20Harry Stebbings?

  head over to Cooley.com and also check out Cooleygo.com. As always, I so appreciate all your support and I can't wait to bring you another fantastic episode later this week.